Ethics and Social Responsibility BM003: Examine the role of ethics and social responsibility in business decision making.

BM03.01 Explain the relationship between ethics and government laws and regulations.

Define “Business Ethics” A collection of principles and rules that define correct and incorrect behavior/conduct for a member of an organization. Notions of what is right and wrong vary from manager to manager, business to business, and country to country.

Laws Relating to Ethics in Business Competition laws Consumer Protection laws Environmental Protection laws Employment laws

Competition Laws The Sherman Act of 1890 Insures that companies remain able to compete fairly Makes it illegal for companies to monopolize trade Prohibits mergers of new company if merged company controls too large a share of the market

Competition Laws (cont.) The Clayton Act of 1914 Makes it illegal to charge different prices to different wholesale customers Bans practice of requiring a customer to purchase a second good

Competition Laws (cont.) The Robinson-Patman Act of 1936 Amended portion of the Clayton Act dealing with the pricing of goods Prevents price discrimination—setting different prices for different customers

Competition Laws (cont.) Wheeler-Lea Act of 1938 Passed to strengthen earlier laws outlawing unfair methods of competition Bans unfair unfair or deceptive acts or practices, including false advertising

Consumer Protection Laws Federal Food, Drug, and Cosmetic Act of 1938 Bans the sale of impure, improperly labeled, falsely guaranteed, and unhealthful foods, drugs, and cosmetics Enforced by the Food and Drug Administration (FDA)

Consumer Protection Laws (cont.) Consumer Product Safety Commission 1972 Establishes minimum product safety standards on consumer products If product is defective, CPSC has the authority to force the manufacturer to recall the product

Consumer Protection Laws (cont.) Truth in Lending Act of 1968 Creditors are required to let consumers know how much being paid in finance charges and interest Business must show finance charge on statements as annual percentage rates to make comparing rates easier.

Consumer Protection Laws (cont.) Equal Credit Opportunity Act of 1975 Illegal for business to deny credit because of age, sex, marital status, race, national origin, religion, or public assistance Requires businesses to notify credit card applicants of application status within 30 days and give reason for rejection

Consumer Protection Laws (cont.) Fair Credit Reporting Act—gives cardholders right to see their credit agency reports and to correct errors Fair Debt Collection Practices Act—forbids debt collectors to use abusive, deceptive, or unfair collection methods

Environmental Protection Laws The National Environmental Policy Act of 1969 Key piece of legislation in environmental protection Created the Environmental Protection Agency (EPA) whose mission is to protect human health and safeguard the air, water, and land

Environmental Protection Laws (cont.) The Clean Air Act of 1970 Comprehensive federal law that regulates air emissions Original act set maximum air pollution standards for each of the 50 states Amended in 1990 to deal with acid rain, ground- level ozone, stratospheric ozone depletion, and toxic substances in the air

Environmental Protection Laws (cont.) The Toxic Substances Control Act of 1976 Enacted to give EPA the ability to track the 75,000 industrial chemicals currently produced in or imported into the U.S. EPA screens these chemicals and can require reporting or testing of any that may pose an environmental or human health hazard

Environmental Protection Laws (cont.) The Clean Water Act of 1977 Give EPA authority to set standards on type and quantity of pollutants that industries can put into bodies of water Illegal to discharge any pollutant into navigable waters unless permit is obtained

Environmental Protection Laws (cont.) CERES Principles (Coalition of Environmentally Responsible Economies) Developed as result of Exxon Valdez accident, which spilled oil along coastal Alaska in 1989 Organizations are asked to follow the principles voluntarily, but are not legally required

Employment Laws Equal Employment Opportunity Law Civil Rights Act of 1964 Age Discrimination in Employment Act Americans with Disabilities Act Equal Pay Act

Employment Laws (cont.) Occupational Safety and Health Laws Enforced by Occupational Safety and Health Administration (OSHA) Sets standards for keeping workplaces clean and free of hazards

Employment Laws (cont.) Fair Labor Standards Act (Wage-Hour Laws) Sets minimum wage Sets number of hours employees can work in a week without overtime pay Prohibits companies from employing children under the age of 14

Employment Laws (cont.) Benefits Laws Social Security Act Employment Retirement Income Security Act (ERISA) Unemployment Insurance Workers’ Compensation Family and Medical Leave Act (FMLA)

Employment Laws (cont.) Labor Relations Laws Enacted by Congress to protect groups of employees National Labor Relations Act (NLRA) Organizing a union Collective bargaining Striking

Ethics and Social Responsibility BM03.02 Examine business codes of ethics and how they contribute to ethical business environments.

Ethical Issues in Business Accepting business gifts Bribing government officials Respecting the privacy and dignity of employees Using company property for personal use

General Content of Ethical Codes Honesty Adherence to the law Product safety and quality Health and safety in the workplace Conflicts of interest Employment practices

General Content of Ethical Codes Selling and marketing practices Financial reporting Pricing, billing, and contracting Trading in securities/using confidential information Acquiring and using information about competitors

General Content of Ethical Codes Security Payments to obtain business Political activities Protection of the environment Source: Business Management, Real World Applications & Connections, Glencoe/McGraw-Hill

Code of Ethics in a Business Environment Removes or reduces opportunities for unethical conduct Must be communicated to all employees Must have procedures in place to handle violations of the code Must have full support of top-level managers Must be enforced to be effective

Ethical Dilemmas Course of action not always clear Notions of what is right or wrong changes over time Values differ among nations Corporate gift-giving Intellectual property Copyrights Patents Trademarks

Solving Ethical Dilemmas Have you defined the problem accurately? How would you define the problem if you stood on the other side of the fence? Whom could your decision or action injure? Can you discuss the problem with the affected parties before you make your decision?

Solving Ethical Dilemmas Are you confident that your position will be as valid over a long period of time as it seems now? Could you disclose without qualm your decision or action to your boss, your CEO, the board of directors, your family, and society as a whole?

Standards by Which Ethical Decisions Are Made The Golden Rule Utilitarian Principle Kant’s Categorical Imperative The Professional Ethic

Standards by Which Ethical Decisions Are Made The TV Test The Legal Test The Four-Way Test Rights View Theory of Justice

Guidelines for Acting Ethically Know your organization’s policy on ethics Understand the ethics policy Think before you act Ask yourself “what-if” questions Seek opinions from others Do what you truly believe is right

BM03.03 How does a business demonstrate social responsibility? Social Responsibility—changing views Profit Maximization (19th-early 20th century) Trusteeship Management (1920s and 1930s) Social Involvement(1960s-present) Stakeholder—All people affected by the actions of a company

Measuring Social Responsibility Social Audit Philanthropy & Volunteerism Environment Awareness Sensitivity to diversity and quality of work life Flexible work hours On-site day care centers

Stakeholders & Social Obligations Owed to Them Stockholders/owners of the organization To increase the value of the organization Suppliers of materials To deal with them fairly Banks and other lenders To repay debts Government agencies To abide by laws Employees and unions To provide safe working environment and negotiate fairly with union-representatives Consumers To provide safe products Competitors To compete fairly and to refrain from restraints of trade Local communities and society at large To avoid business practices that harm the environment

Arguments FOR the assumption of social responsibilities by a business Public expectations Long-run profits Ethical obligation Public image Better environment Discouragement of further government regulation

Arguments AGAINST the Assumption of Social Responsibilities by a Business Violation of profit maximization Dilution of purpose Costs Too much power Lack of skills

Ethics and Social Responsibility BM03.04 Emerging and Social Responsibility Issues in a Multinational Business Environment

Multinational Firms Home country—where business has its headquarters Host country—foreign location where business has its facilities Parent firm—company headquarters Subsidiaries—foreign branches

Challenges—Working in an International Environment Differences in local laws Differences in local customs

Challenges—Working in an International Environment Differences in business practices Use of food at meetings Punctuality or lateness Use of business cards Greetings Formal/informal conduct Bribes and unethical behavior Foreign Corrupt Practices Act—Prohibits use of bribes Corporate gift-giving and stealing of intellectual property

Challenges—Working in an International Environment Cultural Differences Customs, beliefs, values, and patterns of behavior Language Religion Attitudes toward work, authority, and family Cultural Differences (cont.) Practices regarding courtship, etiquette, gestures, and joking Manners and traditions Differences within racial and ethnic groups of same culture Low-context culture High-context culture

Maintaining Ethics in International Management Respecting core human rights Opportunity to achieve economic advancement and improved standard of living Right to be treated with respect Respecting local tradition Customs held in high regard In countries like Japan, gift-giving is a tradition, not a bribe

Maintaining Ethics in International Management Determining right from wrong Evaluate specifics of the situation to determine if the activity is ethical Some actions are unethical in one setting, but acceptable in another

The End of Competency 003